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Changes in Economic Effect of Infrastructure and Financing Methods

Author

Listed:
  • Masaki Nakahigashi

    (Associate Professor, Faculty of Economics, Niigata University / Senior Research Fellow, Policy Research Institute, Ministry of Finance, Japan)

  • Naoyuki Yoshino

    (Dean, Asian Development Bank Institute / Professor Emeritus, Keio University)

Abstract

This paper analyzes the recent changes in the economic effect of infrastructure focusing on the productivity effect of public investment among a declining trend in public investment, and discusses how to promote the spending of private-sector money for infrastructure investment through the creation of incentive mechanisms. In secondary and tertiary industries, the marginal productivity of public capital has declined in many regions of Japan, but even in recent years, there have still been positive productivity effects from public capital. Since the beginning of the 2000s until today, although the regional allocation of public investment has changed, the structure of regional disparity in the productivity effect of public capital has remained unchanged. The important factors for further promoting the use of private sector resources in infrastructure development include: (1) governmental involvement in high-risk infrastructure projects, (2) an earnings structure that appropriately reflects the economic effect of infrastructure (e.g. return of the part of spillover tax revenues to infrastructure investors) and (3) systems designed to increase incentives for infrastructure-operating entities.

Suggested Citation

  • Masaki Nakahigashi & Naoyuki Yoshino, 2016. "Changes in Economic Effect of Infrastructure and Financing Methods," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 12(1), pages 47-68, March.
    • Handle: RePEc:mof:journl:ppr012_01c
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    File URL: https://warp.da.ndl.go.jp/info:ndljp/pid/11217434/www.mof.go.jp/english/pri/publication/pp_review/fy2015/ppr012_01c.pdf
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    Citations

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    Cited by:

    1. Naoyuki Yoshino & Monzur Hossain & Farhad Taghizadeh-Hesary, 2020. "Enhancing Financial Connectivity Between Asia and Europe: Implications for Infrastructure Convergence Between the Two Regions," Asian Economic Papers, MIT Press, vol. 19(2), pages 84-101, Summer.
    2. Yoshino, Naoyuki & Miyamoto, Hiroaki, 2017. "Declined effectiveness of fiscal and monetary policies faced with aging population in Japan," Japan and the World Economy, Elsevier, vol. 42(C), pages 32-44.
    3. Yoshino, Naoyuki & Taghizadeh–Hesary, Farhad & Nakahigashi, Masaki, 2019. "Modelling the social funding and spill-over tax for addressing the green energy financing gap," Economic Modelling, Elsevier, vol. 77(C), pages 34-41.
    4. Yoshino, Naoyuki & Abidhadjaev, Umid, 2017. "An impact evaluation of investment in infrastructure: The case of a railway connection in Uzbekistan," Journal of Asian Economics, Elsevier, vol. 49(C), pages 1-11.
    5. Yoshino, Naoyuki & Miyamoto, Hiroaki, 2017. "Decreased Effectiveness of Fiscal and Monetary Policies in Japan’s Aging Society," ADBI Working Papers 691, Asian Development Bank Institute.
    6. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki, 2019. "The way to induce private participation in green finance and investment," Finance Research Letters, Elsevier, vol. 31(C), pages 98-103.
    7. Yoshino, Naoyuki & Hendriyetty, Nella & Lakhia, Saloni & Alwarritzi, Widya, 2019. "Innovative Financing for City Infrastructure Investment by Increasing the Rate of Return from Spillover Tax Revenues," ADBI Working Papers 979, Asian Development Bank Institute.

    More about this item

    Keywords

    infrastructure; productivity effect of public capital; public-private partnership; infrastructure finance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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